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A Report On The Company 's Welcome Back At Underwriting A $ 250k High Yield Transaction Through The Eyes

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Welcome back. Last week we looked at underwriting a $250K high yield transaction through the eyes of an independent lessor. Our existing customer, RedBet LLC, had properly paid off two short term leases with us, leaving us a small exposure on a third lease (total exposure had been $320K). RedBet is now coming back to finance of $250K in vacuum tank trailers, a sale that is very important to our preferred vendor. RedBet is an oilfield servicing firm headquartered in New Mexico. We asked, “Would you do this deal? Why or why not?”
As much as we appreciate our lessee, we know that it’s even more important for us to value our preferred vendor. With the oil business in decline and our vendor needing to close every sale, this transaction may make or break our relationship with the vendor (who we think could find another funding source to do this deal). In spite of the oil industry downturn, we want to retain this vendor relationship because (a) the vendor is also offering us high quality non-oilfield transactions, (b) the cyclical oil business will eventually come back, (c) this vendor’s originations have been very profitable for us (high yield and excellent performance−so far), (d) we don’t have a concentration in oilfield exposures, and (e) good vendor relationships like this are hard to develop.
In addition, with a yield > 17%, the transaction could generate substantial income for us. So instead of categorically declining this oil industry transaction, we look for a way to get
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